Are Barclays ETNs in Trouble?

Speculation has arisen the Barclays (BCS) could be nationalized, which raises a big question for holders of its line of iPath ETNs.

The New York Times recently reported that Barclays would be cutting 2,100 jobs within their investment banking and wealth management division. This news comes at a sour time. Many banks have lost money in the last year, some have collapsed altogether. As debt instruments backed by the creditworthiness of their issuer, this has some wondering about the safety of these ETNs. It was illustrated earlier this year after Lehman Brothers went bankrupt, creating anxiety amid the ETN industry, reports Joe Morris for Ignites.

Holders of the notes could face dire losses if the issuing bank defaults, reports Ian Salisbury for The Wall Street Journal. One advisor noted that the odds of Barclays getting nationalized are low, and for its part, the bank says investors shouldn’t have cause for concern.

One strategist notes in an ETF Update from Janney Montgomery Scott that nationalization does not create an event for the default of debt, and that governments would provide support for any “systematically important” financial institution, instead of allowing it to default on senior debt.

The bank issued a statement regarding the fact that the iPath ETNs continue to pull in assets and that issuance is at all-time highs. The bank says this is because ETNs are easier to trade and have more predictable risks than swaps contracts. Barclays also notes that on Feb. 17, it expects to report a profit before tax and beat analyst estimates.

As with every investment product, investors need to do their research and understand what they’re getting into. It’s important to determine if you are comfortable with the risks. Some investors are, some aren’t.

Comments

[David Bousquet]

First of all, at least be up-to-date with your facts. BCS has already stated over the last few week that they have enough capital and both their CEO and President put out statements that they will be posting a profit. #2 they moved up earnings to feb. 9th, so much more you missed with Brittan's stand on nationalization. come on dude, BCS went from 2.80 to 6+ in 3 trading days, and will be back to 10 by feb. 9th, the fear was over blown.

2009 Jan 28 11:48 AM

[James Wilson]

YOU NEED TO WRITE YOUR ARTICLES A LITTLE FASTER THAT FEAR PAST 4 DAYS AGO.

OR ARE YOU TRYING TO DRIVE THE PRICE DOWN TO BUY BACK IN CHEAP ????????

2009 Jan 28 01:20 PM

[James Wilson]

OH OK I GET IT YOUR WASTING MY EMAIL SPACE WITH AN ADVERTIZEMNET FOR ETF'S.

STOP IT

2009 Jan 28 01:23 PM

[Tim in HK]

@David Bousquet

So "BCS has already stated over the last few week that they have enough capital and both their CEO and President put out statements that they will be posting a profit"? The same kinds of statements made by BSC and LEH just days before they imploded. If you don't want to end up as an unsecured creditor, don't walk, _run_ away from anything backed by Bar(k)lays.

2009 Jan 28 10:48 PM

[dkp]

you trade in all derivatives at the mercy of issuers.

2009 Jan 29 08:10 PM

[Matthews Alitbare]

Show me a financial that doesn't graph like the graph above. JPM, the best, is at a glorious 50% of its share price a year ago. I'm so tired of all the blogging/media dramatists! CNBC is having their best year EVER in terms of viewership. How dare these journalists accuse Barcap of lying when they bend the truth however they can for a story.

BCS refused money from the British govt not once, but TWICE. Does the market really think Bobby Diamond, John Varley, etc, who built that bank from nothing would watch their company crumble when they could borrow money like that? Get real.

2009 Jan 30 02:42 PM

[CNBC Kicker]

Good luck bashing the stock. I hope Obama does two things for your rich friends
1) Bring back uptick rule
2) Ban short selling for 3 months
That will fix all the nuts of cnbc anal-ist and robbers who are responsible for collapsing the world's economy by instilling fears in investors for companies like Barclays. Barclays will be @ 12 by Feb 10th. Good time to chime in if you want to make some money. I would rate barclays the best western bank on earth at this point based on the facts stated by the management.

2009 Jan 30 08:25 PM